Gaffe leaves CEO defending his Domain

John Textor's comments stir dispute over artists, interns and employment in f/x biz

Proponents of a visual effects union got some fresh ammunition recently thanks to a clumsy attempt at humor by Digital Domain Media Group chairman-CEO John Textor.

By way of backstory, Digital Domain has set up a college degree program in conjunction with Florida State U., and as part of that program, students will do CG work on some DD projects for college credit. Textor was caught saying that tuition-paying students would pay “for the privilege” of working for DD.

Textor’s remark and the prospect of pros being replaced by free labor enraged some vfx artists and bloggers. It didn’t help that DD’s annual report showed Textor getting a $16 million compensation package while the company posted losses of $141 million.

Oooh, my inner 99-percenter was fuming. Another arrogant corporate titan trampling his workforce and collecting absurd compensation while his company drowns in red ink. A perfect tale for the age of the new robber barons.

But the more I looked into all this, the less outraged I became.

I’m not the only one who wasn’t sure how to feel about this. The Visual Effects Society, having heard howls from its members, called Textor’s comments “unsettling” and said, “If the reality matches the remarks of DD’s CEO, then we believe DD is not only denigrating the value of artists who do incredible work under trying conditions, but is also unfairly taking advantage of a difficult job market and will ultimately harm the ability of visual effects artists to survive in the future if such an imprudent business model became the norm.”

But they hedged, too, adding, “If DD’s internship program is merely the same as those that exist in many schools across the country, and they’re only guilty of having their CEO use ill-advised, self-boasting rhetoric that happened to be caught on tape, then we hope the recent loud reaction and unified voice of visual effects artists around the globe has caused DD to be more sensitive and appreciative of the plight of those artists.”

The detail behind the controversy requires some unpacking.

First, there’s Textor himself. I’ve spoken to him fairly regularly for several years. He’s somewhat (small-c) conservative, a Hollywood outsider, and proudly so. It’s not an accident that DD’s new ventures are set up about as far from L.A. as you can get in the continental U.S., or that he’s modeling the company’s animation studio after another company that set up outside Hollywood and thrived making G-rated hits: Pixar. (See the news regarding their first animated pic here.)

I tend to like show folk better than suits, but I don’t think Textor is a ruthless vulgarian. On Monday, he sent an email of apology to DD’s entire workforce. (Textor’s entire message and the statement from the Visual Effects Society can be found with this column online.) He wrote, “I understand where people’s reactions are coming from. It’s not the program, but my glib comment. I wish I could take that back, but I can’t. I can just apologize to you for it, and assure you that I know interns can never take the place of skilled artists and production professionals.”

Second, those corporate numbers are somewhat misleading. Leaving out non-cash charges such as accounting for stock options, DD’s operating loss was $33.5 million. Textor’s salary is $750,000, and he received bonuses of $257,000 and $150,000 the past two years. He’s not the highest-paid person in the company. His stock options are worthless unless DD shares go above $9.63. Currently they’re at $5.50.

What’s more, part of DD’s loss was due to “unutilized labor” — keeping artists on staff between projects. Whereas some companies — including Sony Imageworks, which erstwhile DD topper Scott Ross used to accuse of trying to drive out competition by overpaying artists — have moved away from permanent staff and hire artists on a per-project basis, DD prefers to hold onto its staffers.

“If you look at our unutilized labor, that tells you we care about people,” Textor told me Tuesday. “We did not do what previous management of DD has done. We kept people on. … I’ve got some senior artists down there (at DD’s Florida facility) who show up frustrated we don’t have enough work in Florida. We’re not ready, and (I tell them) just be glad we’ve kept everybody employed. The idea is to create employees in Florida, not contractors. I want to get to 80% employee-based in L.A. We’re not there yet, but we’ll get there.” He also pointed out that DD had 373 employees at the end of 2005, and has 933 now, 669 of them in the U.S.

I think two important things about DD are being obscured by this internship furor. One, DD is getting a remarkable amount of revenue from government grants. Even the DD internship program is through a public university. According to Textor, the grants the company has already received (from U.S. and abroad) exceed the company’s market cap. And the company is pursuing more, as they go after military contracts for training and simulation.

More importantly, the vfx business has been crying out for more business acumen. It’s a recurring refrain I hear almost everywhere vfx pros gather.

Well, this is what it looks like when a businessman runs a vfx company. DD’s internship program is legal in Florida (it might not be in California) and I’m not sure it’s really all that unusual.

As for that government largesse, isn’t this search for new revenue streams exactly what the vfx business has been looking for?

I admit my inner 99-percenter is still a little queasy, but that’s why I’m a Variety mugg, not a CEO. DD even turned a profit last quarter, at least on paper. God bless America.

BITS & BYTES:

People & Promotions: Panavision has added Joe Matza and Robert Solomon to its board of directors. Matza is a founder and former prexy of eFilm. Solomon’s credits include stints at Ascent Media and Encore Media. … Paul Geffre has returned to post house Light Iron. Geffre was most recently at Stereo D, where he worked on stereoscopic 3D conversion of pics including “Abraham Lincoln: Vampire Hunter” and “Thor.” … London’s Lipsync Post has promoted Lisa Jordan to facility director and James Clarke to head of digital intermediate. … Image Systems’s restoration, color grading and mastering business has changed its name to Digital Vision, the monicker of its corporate parent. Digital Vision has also named Hans Isoz CEO and Kelvin Bolah managing director. Isoz comes from Bonnier Broadcasting & Evening Paper. Bolah was most recently worldwide VP of sales for Digital Vision.

Vfx: Reliance MediaWorks has licensed Katana, the lighting and look-development tool developed by Sony Imageworks and now developed by the Foundry. Reliance will use the tool at its U.K. and Mumbai facilities. David Folwer, head of technology for Reliance MediaWorks U.K., said “Katana is definitely helping us attract the best lighting talent — they can’t wait to get their hands on it.” Industrial Light & Magic and Digital Domain also use Katana. … Deluxe’s Method Studios contributed 114 “underworld” vfx shots to Warner’s “Wrath of the Titans.” All featured the rock giant Kronos in a full CG environment. Olivier Dumont was Method’s vfx supe; Aurelia Abate was Method’s vfx producer.

3D: AEG’s John Rubey told a recent PGA salon at Soho House he expects National Football League telecasts in 3D no later than 2014. … 3ality Technica will unveil several new tools for 3D production at the NAB Show, including the Helix camera rig and the IntelleCam, IntelleCal and IntelleMatte software applications. 3ality Technica will also present the Sony PMW-F3 accessory for the F3 2D camera. Company will also showcase the SIP 2100 stereo image processor. NEP Broadcasting will partner with 3ality Technica at the show, deploying a broadcast truck outfitted with the SIP. It will demonstrate the new software. Element Technica accessories have been rebranded with the “Elements” monicker since the company merged with 3ality Digital. … The new Meduza Titan 3D television camera will have a 3ality Technica motor drive unit (same as used in the 3ality Technica THC) built in for interaxial, convergence, focus and iris control.

Software updates: Luxion has released version 1.3 of the KeyShot plugins for Creo and Pro/ENGINEER 3D. … Digital Vision will unveil two new products at NAB: Phoenix Video, for videotape restoration; and a new Nucoda “ACES” Workflow, using the ACES (Academy Color Encoding System) developed by the Motion Picture Academy’s Science and Technology Council

Miscellaneous: Cinedigm has announced the deployment of 16 Cinedigm-Certified screens at La Maison du Cinema independent circuit in Quebec. … REI Cinemas of South Carolina has selected Barco as its exclusive digital cinema provider. REI is converting all 26 of its screens to Barco DP2K-20C projectors. CineVision is the digital cinema integrator for the circuit. … Following beta rollouts in San Francisco, Denver, Seattle, Kansas City, Dallas, Minneapolis and Houston, AEG’s new axs Ticketing system has expanded to the Mountain Winery in Saratoga, Calif., starting when tickets go on sale Friday, April 13, for Alison Kraus and Union Station. AEG aims to build out axs as a larger platform for ticketing and audience engagement. The axs Ticketing service is also available on mobile plaforms and has Facebook and Twitter integration. Further expansion of axs to domestic and international territories is planned for coming months. … AbelCine has launched a financing program for Assimilate’s Scratch Lab production dailies system. Program will finance systems for up to three years. Three configurations are available: Scratch Lab software only, a Laptop Package and a Workstation Package. Prices start at $265/month. … Assimilate is offering a professional training and certification program for Scratch Lab via selected partners: Moviola in Hollywood, Manhattan Edit Worship in Gotham, Digital Film School in Mumbai and Lapin Bleus of Paris. … Boutique music production company Shout It Loud Music has opened a new 3,000 square-foot studio at 39 West 38th St. in Gotham. … Mission Critical is using markerless motion capture system iPi for game development, including the title “Frantic Freddy.” … Creatasphere has issued the call for entries for the third annual DAMMY Awards, recognizing excellence in innovative digital asset management technology.